Hence, the decision of being compliant is taken if and only if
(1 - μp)U(Rnpi(X) - c) + μpU(Rnpi(X) - f - c) > pU(Rnpi(X) - F) + (1 -p)U(Rnpi(λ))
Let us denote c(A) the marginal individual indifferent between being compliant or not:
(1-μp)U (Rnpi (λ)-c(λ))+μpU (Rnpi (X)-f-c(λ)) = pU (Rnpi (X)-F ) + (1-p)U (Rnpi (λ))
and the equilibrium compliance rate is defined by
fɛ(ʌ)
I dG(0,c).
Note that when λ = 0, then Rnpi(0) = R(O) = V = r - δ. Hence, C(O) = c(0). This means
that the two curves start from the same point.
Proposition 6 Under risk neutrality, in the absence of public information on criminal records,
there is an unique equilibrium compliance rate given by Xnpi = G(0,p(F - μf )) while under
public information there are potentially multiple equilibria. Hence, there exists some circum-
stances where hiding criminal records from the public’s eye might increase the equilibrium
compliance rate.
Proof: Under risk neutrality, C(X) is given by
(1 - μp)(RNPI(X) - C(X)) + μp(R^1 (X) - f - C(X)) = p(Rnpi(X) - F) + (1 - p)(Rnpi(λ))
which simplifies into c(λ) = p(F - μf ). ■
13
More intriguing information
1. Research Design, as Independent of Methods2. The name is absent
3. The Role of Land Retirement Programs for Management of Water Resources
4. Voting by Committees under Constraints
5. Opciones de política económica en el Perú 2011-2015
6. Regional dynamics in mountain areas and the need for integrated policies
7. Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes
8. Julkinen T&K-rahoitus ja sen vaikutus yrityksiin - Analyysi metalli- ja elektroniikkateollisuudesta
9. The name is absent
10. The name is absent